How HR can fix the UK's productivity problem
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Over the last two weeks, we've looked at how to get started on this year’s short-term challenges. This time, we’re addressing a long-term issue - the UK’s productivity problem - and how HR needs to be part of the solution.
What is productivity?
Productivity is essentially measured by how much is produced for a given input (such as an hour’s work). It impacts directly on our country’s ability to improve its standard of living and it is also linked to growth rates of our economy, for example stronger GDP growth.
Why is it a problem?
Before the 2008 recession, productivity had improved annually by around 2%, but since then it has stagnated, and it remains 0.5% below pre-recession levels. The UK is 35% behind Germany, and 30% behind the US (Source: The Guardian). We’ve consistently lagged behind most of the G7, which risks bringing down wages and living standards.
How can we fix it?
HR is fundamental in kickstarting the UK’s productivity, but it’s not all up to us. The government has promised long-term investment in this area, alongside developing a more highly skilled workforce, better transport links, improved digital infrastructure and generally boosting the UK’s trade at home and abroad.
That all sounds great (in theory) but in the meantime HR, and specifically Reward, are on the front line. We need to utilise our insight into the workforce to ensure the UK is working smarter. Here’s how:
- The process starts with hiring. You need to create a hiring process which attracts the kind of motivated, talented and productive employees you need. It’s important that they understand the importance of their new role, and how their day to day actions will impact on the wider business. Read our blog on attracting and retaining talent here.
- Reward is key: understand external market rates and how offered pay packages are aligned with current employees and business requirements. Rewarding the right levels of performance and behaviours reinforces your message about what is important to the business. But it’s not all about the money: non-monetary rewards are excellent when you want to acknowledge the right effort and contribution. Employee recognition provides a boost that money just can’t buy. Read our blog on recognition here.
- Develop an effective organisational structure. Know what levels you need, what type of roles need to occupy these levels and what type of talent are needed for these roles. Review it regularly, ensuring that your organisational design is fluid enough to match the requirements of the business. Read our blog on organisational design here.
- Utilise workforce data to analyse working effectiveness against commercial results. Look after those employees that are overperforming, nurture those that have potential and are performing well – this is about 60% of your workforce, of which at least 20% can be moved into the overperforming bracket. Manage the 10% that will be underperforming, with the likelihood that 5% may exit the business. Read our blog on using HR analytics here.
- Work smarter, not harder. Invest in more efficient systems. Simplify and streamline processes and practices, removing any that are inhibiting output. Develop your employees, share knowledge and provide training. Encourage agility and develop cross functional working, keeping individuals productive and service levels high all the time. Read our blog on the future of HR systems here.
This may seem like a significant programme of work, but these steps will bring a marked improvement in your company’s productivity, and ultimately benefit the whole country. Furthermore, the immediate commercial benefits include more control over payroll costs; less costly recruitment process; improved retention; and reduced salary wastage on bad hires or ad hoc pay spend.
We’re all aware of the costs of disengagement and high turnover, so it should be fairly straightforward to make the business case for change. A good starting point is a Reward Audit, which will allow you to identify which elements of your current strategy are working well, and which need improvement. As a commercially focused HR leader, you should then be able to use this insight to build a business case for your productivity plan.
To discuss a Reward Audit, or any other aspect of Pay and Reward, call Innecto on 020 3457 0894.
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